Business Pricing Issues
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What makes The Montana Group the best option for selling a business?
There are many various options when selling a business. Of course, one option is selling the business without representation. While this does indeed “save” the transaction fee the money saved is costly, as an accomplished intermediary will increase the sales price significantly over the fee saved. Another option would be to use a business owner’s attorney or accountant to act as the intermediary. This too can also prove costly as it is unlikely that these advisors have extensive experience is selling operating businesses and are unlikely to have the database and relationship with those additional buyers needed to create a competition necessary to increase the price for the seller.
The Montana Group has for 25 years sold profitable operating businesses with at least $2 million of pre-tax profits that are in the manufacturing, distribution, or service sectors. As our website (www.montanagroup.com) will illustrate we have sold businesses throughout the United States. We have a thorough database of 100’s of buyers with an understanding of their acquisition criteria, thus enabling us to contact well funded potential business acquirers. The Montana Group offers its services on a success based fee structure (no retainer) that aligns its interest with the owner’s, the transaction structure and price. This fee structure is highly unusual in the business brokerage world. These services include an accountant review to allow for the financial presentation in the format that best promotes the company and this includes the recasting of the historical income statements which increases the value of the business. As consultants The Montana Group has recommendations of those needed throughout all aspects of the sale process in order to increase the likelihood that the transaction indeed closes to the satisfaction of all.
It should also be reinforced that because The Montana Group does NOT charge a retainer then it is apparent that they feel confident in their ability to initiate and complete the sale of a company as only this results in a fee paid. It should also be noted that The Montana Group’s listing consulting agreement allows either party to cancel the agreement with a 30-day notice. This termination is also very unusual.
“Selling a business is a once-in-a-lifetime and lifestyle change that often affects multiple generations. So, use a specialist with years of experience. While this can be done by the business owner in an attempt to be frugal, our 25 years with this specific focus tells us that often the owner is reducing the sale price in multiples over the money saved from not paying a success-based consulting fee.”, says Emmett Barnes, President and Founder of The Montana Group.
Estimated Time in Selling a Company
After executing an agreement to work with the representative firm here is the ballpark timing estimate for Selling a Company:
- The consultant will supply a list of financial data necessary to properly present the company’s historical, current, and future expectations. While this sounds very basic it really is an opportunity increase the ultimate price of the business, so merger and acquisition experience is ultra important. There will also be a list and conversations that will allow the presentation to provide an understanding of the company’s focus, method of operation, and makeup. This information is often time consuming to assemble however, it is critical to the ability to attract the proper acquirers who should make very competitive offers. The process really does not begin until this information is provided and the time required to assemble varies from days to weeks.
- The consultant uses the information from the prior paragraph and assembles a memorandum presenting in a clear and encouraging format, which is based on their experience in selling similar businesses. This should be completed within a week to ten days.
- The consultant approaches potential buyers based on the authorization of the seller. This starts with an initial thumbnail summary that is intended to remain anonymous and an initial conversation to understand the reason for the interest is followed by a Confidentiality Agreement (also known as a Non-Disclosure Agreement). After answering questions and supplying additional insight to the investment opportunity the non-binding valuations are presented. This phase should take 30-45 days.
- The consultant and stockholders decide which valuations are attractive and appear to be a likely candidate. Conference calls between these suitors, the stockholders, and the consultant are made to present the company in more detail and to learn more of the suitors. This should be completed within 2 weeks.
- Of those suitors who remain in the process are invited to tour the facilities. The interview goes both ways. Depending on schedules and the number of dates required this could take several weeks.
- The consultant then discusses with the potential buyers their interest in proceeding, which is a Letter of Intent. Once the stockholders review these offers and the consultant negotiates to enhance the preferred proposals then one is selected. This could take from one to several weeks.
- The due diligence process begins which is an extremely detail assemblage of information, visits from the buyer’s representatives and lenders, and the legal document negotiation and assemblage. This could take two+ months.
Of course, every transaction is unique so this is only an educated guess. We at The Montana Group advise that six months is a good target and we strive for as expeditious as possible.
“Selling a business is a once-in-a-lifetime and lifestyle change that often affects multiple generations. So, use a specialist with years of experience. While this can be done by the business owner in an attempt to be frugal, our 25 years of this specific focus tells us that often the owner is reducing the sale price in multiples over the money saved from not paying a consulting fee.”, says Emmett Barnes, President and Founder of The Montana Group.
Newsletter on Selling a Business
The Montana Group has, since 1991, consulted with business owners on how to improve the marketability and ultimately the business’ sale proceeds. This complimentary monthly newsletter focuses on issues that we have experienced while consulting with business owners on selling their business.